VERIFICATION :-It means confirmation or proving the truth about the assets and liabilities appearing in the balance sheet. Auditor has not only to check the arithmetical accuracy of the account by vouching only.
H has also to verify the assets and liabilities appearing in the balance sheet to satisfy himself that these are correct. Auditor will also check that the existence of actual items and their actual possession held by the company concern.
VOUCHING :-
It means a careful examination of all original evidences to prove the accuracy of the entries in the books of account and to assure that no transaction has been omitted from the books. So vouching means to verify the transaction recorded in the book. Any how vouching refers to transaction and verification of the statement of an asset or liability.
OBJECTS OF VERIFICATION :-
The object of verification of asset is the satisfaction by the auditor as to its existence, proper disclosure, proper valuation, correct ownership on the balance sheet.
TECHNIQUES OF VERIFICATION :-
In the process of verification following techniques are used :
1. Existence Of Assets :-
The auditor should satisfy himself that such assets and liabilities which are shown on the balance sheet really exist on that date or not.
2. Proper Disclosure :-
The auditor should also satisfy himself that each item of assets and liability is being properly disclosed as required by the law.
3. Ownership Of Assets :-
This technique is used for establishing the ownership of assets and liabilities. Those assets which are shown on the balance sheet must be properly of the client.
4. Assets In Possession :-
The auditor should satisfy himself that such assets which are shown on the balance sheet were in the possession of the client at the date of the balance sheet.
5. Valuation Of Assets :-
Auditor should also satisfy himself that all those assets which are shown in the balance sheet are properly valued. There are different factors which determine the basic of valuation like, nature of business, object for which the assets are held and the nature of assets.
6. Valuation Of Liabilities :-
Auditor should also satisfy himself about the liabilities that these are properly valued which are shown on the balance sheet. Overstated or understand liabilities do not give a true picture about the financial position.
7. Correct Valuation :-
Auditor should pay special attention to this point. Because profit and loss account also depends upon the accuracy of valuation of assets and liabilities. Valuation upto object is that balance sheet should show a true and correct view about the financial position of a client firm.
8. Purchase By Proper Authority :-
The auditor should also satisfy himself that the purchase of any particular asset was made by the orders of empowered person. In this respect, auditor may check the legal document or resolutions of the directors and shareholders.
9. Business Motive :-
Auditor should also satisfy himself that all the assets were obtained for the business motive of the firm.
10. Checking Of Charges :-
Auditor should also examine that assets of the firm are free from mortgage and pledge.
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